2016 Could Be Good for Tesla Motors in China

Tesla Motors, Inc. (NASDAQ: TSLA) in China did not perform well this year, as the California automobile company had to handle tax breaks favoring Chinese manufacturers earlier in the year. The automobile maker had to process a series of nebulous local policies on license plates and lower-priced Model S copycats. Next year might be better for Tesla, even if the company still fraught with its share of challenges.

Such hurdles are expected when any U.S. technology startup company expands into China, but they seem particularly hard to hit Silicon Valley --Elon Musk. Tesla sold only 3,500 cars in China during 2014 and reduced an approximately 30% of its Chinese workforce this past March.

In October, CEO Musk confirmed that Tesla will be opening the first manufacturing plant in China, which could decrease the price of the Model S by about one third or even more. Tesla also said it is looking for manufacturing partners in China and pushing for the simplification of the country’s lottery on the license plate.

It is possible that the company will be gearing up for a brilliant year in 2016 because China’s government has pledged to put five million electric cars on public roads until 2020. But the question remains as to whether Tesla’s luxury cars can defeat cheaper competition from local companies like BYD.

However, Tesla still needs a long time to dominate the electric-car market in China if the charging station issue remains unresolved. It does have one ace up its sleeve, however: a reputation for technological innovation and excellence that could serve it well in the race for a more affordable, yet reliable, electric car. Even if graphene batteries don’t turn out to be the silver bullet some hope, other equally intriguing projects are already rolling out.

This summer, Tesla put out a new battery pack with anodes made partially of silicon — an innovation that increased pack energy by 5% and travel range by about 15 km. Moreover, if incremental, advances like this, paired with cost decreases, could help Tesla finally corner the market. But only time will really tell.

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